Everything You Need to Know About Money Orders & How They Work

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Have you ever wanted to send money but were worried about sending a check tied to your bank account? Or maybe you have some cash you’re trying to send a relative across the country or abroad, and don’t want to deal with the hassle of depositing and transferring the funds. There is a perfect solution for these situations and ones like them: money orders. A money order is like a check. Basically, it’s a note stating that you are transferring money to someone.

It can also be an easy way to get paid for goods or services if cash isn’t convenient and you’re worried about accepting a credit card or taking a check. Money orders are issued at US Post Offices, some grocery stores, and convenience stores. Check out our guide to how money orders work or click on a link to go straight to your question!

Why use money orders?

There are many different ways to transfer or send money. Why might you choose a money order? Let’s break it down. 

  • Money orders are safer than checks because they typically don’t bounce. Saying that a check has bounced means that the account it’s supposed to pay you from does not actually have the funds necessary to do so. Say you’re given a $300 check for a bike you sold online. You go to cash it, and the bank tells you that it’s bounced. Now you’re in a difficult position where you have to reach out to the buyer and have them reissue the check after having added more funds to the account.
  • Money orders avoid this problem because they’re paid upfront. When your buyer goes to get their money order at the Post Office or grocery store, they have to have the money in hand. That means that the shop offering the money order already has the money needed to pay you—no worry that the money order might bounce. They’re similar to prepaid debit cards in that they’re set to a fixed amount.
  • Another benefit is that you do not need a bank account to send or receive a money order. Perhaps you don’t have a bank account (though you might want to consider it!), or maybe your bank charges fees for withdrawals that you don’t want to deal with. Maybe you don’t fully trust your buyer or seller and want to avoid unnecessary risk. Whatever the reason, money orders avoid the hassle by allowing consumers to buy fully in cash. (Though you may actually deposit a money order in a bank account if you prefer.)
  • Lastly, another reason money orders are considered safer than checks is that they contain no personal financial information. It’s rare, but skilled scammers may be able to get closer to stealing your identity or stealing other information if they have access to your bank account number and routing number: two items included on a check.

Making sure none of that information is available to someone you’re paying is an easy way to avoid that risk. For this reason, you might want to consider money orders if you’re buying things online from vendors you’re uncertain about.

So how do money orders work?

Here are money orders in action:

  1. Person A pays the, say, Post Office upfront for the money order. They ensure that the intended recipient (person B) is the person to whom it’s addressed, then person A signs it.
  2. The Post Office now has the money on file.
  3. Person A sends the money order to Person B.
  4. Person B can then take their money order to the Post Office and cash or deposit it.

In addition to the post office, many companies issue money orders, typically through grocery stores or convenience stores.

You should also be aware that most places will have a limit on how much you send in a money order, and money orders cost fees depending on how much you are sending. For instance, the Post Office allows money orders up to $1,000 dollars. You can send multiple money orders, but if you’re sending more than $3000 in one day, there are special tax forms you’ll have to fill out.

Sending a money order

If you’re wondering how to get a money order, you can pick one up at a US Post Office, a bank, a grocery store, or large stores like Walmart. Be sure to bring cash with you, as this is the surest way to purchase a money order — though some places, like the Post Office, will also take a debit card.

First, you pay upfront. Then, just like a traditional check, you sign it and include the recipient, your address, and their address, plus a memo if you like. One important thing to be aware of is to be careful at convenience stores or payday loan shops.

These places, though more accessible in some communities, may charge much larger fees than a government Post Office or an established grocery store. If you’re worried about money order cost, you may want to research other places to buy one.

Cashing your money order

You can cash a money order at USPS, a bank, grocery store, or payday loan shop. Just walk in with your money order and a valid government-issued ID card.

Be aware that grocery stores, convenience stores, and loan shops may charge you a fee to cash your money order — and a loan shop may charge an especially large fee—so you may want to avoid that if there are better options accessible to you.

There are also options when it comes to how to get a money order paid out. You may completely cash out your money order if you need cash ASAP, or you may deposit the money order in your bank account if you cash it at your bank. If you need a little cash now, but would like to deposit the rest of the money order, most banks will allow this, too.

Avoiding Scams

The final thing to know about money orders is that, though they are generally a safer option than a check, they can still be used in scams. Here are some key things to be aware of to make sure you’re not getting ripped off.

  • Be sure you only accept money orders for the amount you’ve requested.
    • If someone pays you much more than you invoiced them or were charging them for some service you provided, this could be a sign of a scam.
    • You should also be suspicious of money orders that you did not request at all. If this happens, contact the company issuing the money order immediately.
  • Do not send money orders to untrustworthy vendors.
    • Because money orders are basically just a cash payment, if you send someone you don’t trust a money order in advance and they fail to provide you with the items or service you were paying them for, there’s not much that can be done. It’s a good idea to have your agreement in writing and to only pay trustworthy vendors.
  • Postal Service money orders cannot be more than $1000, and foreign ones, $700.
    • If you get a money order in excess of those amounts, you can pretty much be sure it’s a scam. When receiving a money order for a large amount, be sure to look up what the transfer limit is for the company issuing the money order. Typically, the limit is around $1,000.
  • Check for signs of tampering on any of the written lines.
    • Similar to a check, money orders are filled in with information relevant to the sender and the receiver. If any of these lines appear smudged, or as though someone has tried to change the information, you might consider contacting the money order company.
    • Use pen when filling out a money order, and be sure to write clearly and legibly to avoid any possibility for a mistake in cashing it.

Don’t put your financial situation at risk by exposing yourself to scams. If you’re worried about your financial situation, you might consider trying a financial health tool to make sure you’re on top of everything.

Wrapping up

Understanding the risks and benefits is an important first step in responsibly using money orders. These may be a useful alternative to checks in situations where you’re worried about the possibility of a check bouncing, or in a situation in which you need to send cash to someone far away.

Consider if money orders are right for your needs with the above information in mind!


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